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Industrial Development Corporations approach in developing Green Industries August 2013Focussing on Renewable Energy especially CSP

Rentia van TonderHead: Green IndustriesContentGreen SBU: Focus, Portfolio & Strategies2IDC & Renewable Energy 3IDCs role in CSP 4Conclusion6Funding RE5IDC background1#2Introducing IDC

Established: 1940Type of organisation: Development Finance Institution (DFI)Ownership: State owned company, 100% owned by the SA governmentTotal assets: R115 billion (30 September 2012 - group)Total liabilities: R24 billion (30 September 2012 - group)Funding status: Self financing, pays dividends and income taxCredit rating: Baa1 (Moodys) in line with sovereign ratingMain business area: Industry development through the provision of funding resulting in job creationGeographic activities: South Africa and the rest of AfricaProducts: Custom financial products to suit a projects needs including debt, equity, guarantees or a combination of theseStage of investment:Project identification and development, feasibility, commercialisation, expansion, modernisationNumber of employees: 804 (December 2012)

#3Vision, mission, objective and valuesValuesVisionTo be the primary driving force of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent MissionThe IDC is self-financing national development finance institution whose primary objectives are to contribute to the generation of balanced, sustainable economic growth in Africa and to the economic empowerment of the South African population, thereby promoting the economic prosperity of all citizens. The IDC achieves this by promoting entrepreneurship through the building of competitive industries and enterprises based on sound business principles. ObjectivePassionProfessionalismPartnershipOutcomesLead industrial capacity developmentPrimary: Facilitate sustainable direct and indirect employmentSecondary:Improving regional equity, including the development of South African rural areas, poorer provinces and industrialisation in the rest of Africa;Growing the entrepreneurial and SME sectorsTransformational impact on communities and growing black industrialistsEnvironmentally sustainable growthGrowing sectoral diversity and increased localisation of production#PositioningNon-commercial focusFiscal transfers and grantsDevelopment objectives (social)Government / NGOsHigh commercial focusPrivate sector capitalFinancial objectivesKnown risksCommercial FinanciersCommercial and development focusSharing riskInternally generated funds, government funds, loansDFIsGreater importance on financial objectivesGreater importance on social and developmental objectivesIDC does not directly compete with other institutions, but encourages cooperation with a variety of these institutions to achieve its goalsIndustrial Development Corporation (IDC)Development Bank of Southern Africa (DBSA)sefaNational Empowerment Fund (NEF)Etc.ABSAStandard BankFirst National BankNedbankEtc.

#5Green Industries SBU: FocusEnergy efficiencyHeat, Electricity & building efficiencyCleaner production / Industrial EfficiencyTransport EfficiencyWaste to Energy Fuel Based EnergyCo-generationEmission and pollution mitigationAir pollution controlWaste Management/ RecyclingClean stovesBio FuelsBio EthanolBio DieselRenewable Energy: Non-Fuel Power Wind Power GenerationConcentrated Solar PowerSolar Photo Voltaic PowerServices related to renewable energy & energy efficiencyLocal manufacturing related to renewable energy & energy efficiency

Hydro

16 ProjectsExposure R620m20 ProjectsExposure R185m3 ProjectsExposure R193m20 ProjectsExposure R1.5bnGreen Industries SBU: Portfolio

IDCTotal Investment - R631mTotal Round 1 & 2 Investment R74.7bnTotal Investment R16bnTotal Investment R24bnTotal Investment R34bnSOLAR PVWINDCSPHYDROIDCRenewable Energy: IDCs participation

IDC Total Investment R7.7bn7 Projects, 452MW, R1.9bn1 Projects, 10MW, R204M8 Projects, 213MW, R2.1bn2 Projects, 150MW, R3.5bnRenewable Energy: Portfolio analysisNo Small IPPs (1-5MW) RfP released 20 Aug13IDC reviewed & commented on draftGWBy June 20122 500MWR75bnDetermination announced up to 2020: 6 900MWKey considerations:Grid availabilityGrid Intermittency & stabilityNumber of Large scale PV & wind projectsLack of smart grid in SALoad factor compared to coal based energyCost per kwh of REBy 203018 000MWR500bnRenewable Energy: Current realityLocal content %Avg JobsCSP has the highest potential for job creation

CSP Highest capital per MW

Local content targets expected to increase gradually with every bidding round

Indirect impact on rural upliftment and job creation

Research conducted to date on localisation potential:SAPVIA: Rooftop study; Localisation Study with DTI SAWEA: Local content workshops & engagementSASTELA: Localisation study: Ernest&Young, GIZ, DTI CSIR: Solar Roadmap Study & WorkshopsDTI: Sets hurdle Local content for RE ProjectsIDC impactRenewable Energy: Current reality50 MW : Round 2150 MW MW: Round 1Release of RfP by DoE: CAPNERSA REFIT PROPOSALNov 2011Oct 2009May 2012Aug 2011Oct 2010 : SASTELA co-founded by IDC to promote CSP Minister of Energy has made a further determination in December 2012 of 400 MW CSP allocation.

The industry is still waiting for a formal announcement regarding the CSP allocation for Mar14

Preference towards CSP with storage. IDC impactRenewable Energy: CSP tariff roadmap12

Molteno: DorperWind: 100MWJobs: 147 Rustenburg: RustmoSolar PV: 7MWFull Time Equiv. Jobs: 48Malmesbury: SwartlandSolar PV: 6MWJobs: 27 Oyster Bay: RedcapWind: 80MWJobs: 275Pofadder: KaXuConcentrated Solar : 100MWJobs: 660Caledon: KlipheuwelWind: 27MWJobs: 47 Pofadder: KonkoonsiesSolar PV: 10MWJobs: 85De Aar: MuliloSolar PV: 10MWJobs: 35Prieska: MuliloSolar PV: 20MWJobs: 71Kenhardt: AriesSolar PV: 10MWFull Time Equiv. Jobs: 60Gouda: AvengWind: 138MWJobs: 124 Former Ciskei: Innowind ChabaWind: 21MWJobs: 96Port Elizabeth: Innowind GrassridgeWind: 60MWJobs: 230Grahamstown: Innowind WaainekWind: 24MWJobs: 107Kakamas: KakamasHydro10 MWJobs: 139Upington: KhiConcentrated Solar : 50MWJobs: 727IDC funded 17 projectsSishen: AvengSolar PV: 75 MWJobs: 142More opportunities for regional integration and development IDC impactRenewable Energy: Regional development & integration SED and ED #

Renewable Energy: Opportunities for regional development & integration SED and ED Northern Cape (2% of population) got 52% of Investment = R39bn

Revenue streams to communities (2 CSPs): Trust dividends0.1% of total revenue on ED1.0% of total revenue on SED30% on preferential procurement

Initiated a workshop and task team between Green SBU, Strategy and R&I with CSIR to develop social impact assessment tool

2

% Investment% Population

52%IDC impactIDCs role in CSPKey role through project development and funding of PFS and BFS;Potential to provide base load electricity;Steep learning curveNew industry development and risk takerTotal potential exposure to CSP could be more than R7bn (round 1 to 3);Support to develop industry and drive cost down.Potential to source funding to reduce cost, specifically for CSPImportance to position industry as strategically important for future electricity supply.

IDC involvement in Concentrated Solar Power (CSP)NameSize TechnologyLocationCommunityIDCTotal IDC ExpStatusXaXu (Abengoa)100MW TroughPofadder!KaXu 20%29%Under construction!Khi (Abengoa) 50MW TowerKeimoes!Khi 20%29%Under constructionSol Africa50MW TroughUpington5%25%Round 2 (IDC only a development partner)iLangalethu100MW TroughUpington- Karoshoek5%20%Bid Round 3Xina (Abengoa)100MW TroughPofadder!Xina20%20%Bid Round 3Total potential exposure: R7,3bnFinancing CSPFinancing CSP in South AfricaNew industry riskier compared to PV and Wind;Financing of Trough technology easier than Tower;Requirements from commercial banks risk averse;Importance of EPC and O&M experience and strength of partners;Long term investment approach;

IDC Funding possibilities for RE projectsProject development through participation and cost sharing of bankable feasibility studiesEquity participationMinimum: Meaningful 10% with minority protectionMaximum: Not majority, 30% BEE and BBBEE fundingLending to Community Trust or BEE shareholder to invest in projectRepayment with dividendsWill allow 10-25% cash (trickle dividend) for community trust / BEE shareholdersFavours community trust conceptDebt participationSenior debt with tenure of 15 years post commercial operation date (COD)Interest capitalisation during constructionConstruction loan

CommunityTrustBEE# HoldCo-BCommunityHoldCo-CIDCBEE#Project CompanyStrategic Equity PartnersDeveloperIDC Funding with Preference SharesOrdinary shareholding# This could also be a BBBEE or NPOOwnership and IDC funding18Renewable Energy: Project Structure for a REIPP Power Project in SAFixed priceLSTK ContractEskom20-Year Take-or-payPower PurchaseTurbine supplier10-Year Operation& MaintenanceLandOwnerLong-term Land Lease AgreementBBBEE & BEEDeveloperStrategic 2.Institutional 3. IDCMain Sub-contractorsEPCContractorRSABalance of PlantSupplierRSA Civil ContractorRSA Electrical Contractor15%85%ShareholdersAgreement & Shareholder LoanAgreementRE IPP Project Wind / Solar/ CSP/ Hydro Independent PowerProducer (IPP)

EnvironmentalAuthoritiesConstruction Permit & ROD25% EquityInternationalTurbine/PV ManufacturerIntercreditorAgreementIDC Commercial BanksSecurity SPVFacility AgreementsCTA & Senior debtSecurity Agreements& IndemnityDebt GuarantorAgreementDirect Agreements75% DebtGeneration Licence NERSAConclusion

Khi tower Aug , 2013 at 173m height

Conclusion

The Industrial Development Corporation19 Fredman Drive, SandownPO Box 784055, Sandton, 2146South AfricaTelephone (011) 269 3000Facsimile (011) 269 2116E-mail callcentre@idc.co.za

Thanks